ISO Exercise AMT Calculator United States

What the ISO AMT calculator does

This calculator estimates the alternative minimum tax that can arise when you exercise incentive stock options (ISOs) and keep the shares. Under the regular tax system, exercising and holding ISOs creates no ordinary income. The AMT counts the gain built into the shares at exercise, the bargain element, as a preference item. Enter the fair market value, the strike price, the number of shares and your regular tax figures, and the tool estimates how much extra AMT the exercise adds.

Employees at startups can owe a large AMT bill on paper gains from shares they cannot yet sell, especially when there is no market for the stock. How many options to exercise in a given year often comes down to this number, so it is worth knowing before you exercise.

How the calculation works

• It computes the bargain element: fair market value per share minus the strike price, times the shares exercised.
• It adds the bargain element to your regular taxable income to get alternative minimum taxable income (AMTI).
• It subtracts the AMT exemption for your filing status, reduced by the phaseout if your AMTI is high enough.
• It applies 26% up to the rate-change threshold and 28% above it to get the tentative minimum tax.
• It compares the tentative minimum tax with your regular tax and reports the excess as additional AMT.

Only the amount by which the tentative minimum tax exceeds your regular tax is added to your bill. If your regular tax is already higher, the exercise adds no AMT that year.

Understanding the bargain element

When you exercise, you pay the strike price for shares that may be worth much more. The regular tax system ignores that spread until you sell; the AMT counts it right away. A large exercise of deep in-the-money options can therefore produce a tax bill with no cash coming in to pay it.

The bargain element grows with both the spread and the number of shares. Many people exercise in tranches over several years, each year exercising just enough to use up the gap between their regular tax and the tentative minimum tax without creating a large AMT bill. The calculator shows that gap so you can size each exercise.

The exemption and its phaseout

The AMT exemption shields part of AMTI from the minimum tax, and the amount depends on filing status. Above a threshold it phases out as AMTI rises, so the exemption shrinks just as a large ISO exercise pushes AMTI up. The calculator reads the current exemption amounts, phaseout thresholds and phaseout rate from maintained parameters and reduces the exemption before applying the AMT rates.

At higher incomes a smaller exemption and a larger share of the base in the 28% band both apply at once, so the AMT can rise faster than the bargain element itself. The exemption figure in the output shows how much shelter is left.

Reading your result

The output shows each step: the bargain element, AMTI, the exemption after any phaseout, the taxable base, the tentative minimum tax, the additional AMT and your total federal tax with the AMT added. With the intermediate figures you can see where the liability comes from and how changing the number of shares would move it.

The estimate covers the exercise year only. It does not model the minimum tax credit the AMT often creates for later years, or the capital gains treatment when you eventually sell shares held long enough. Both can change the total cost of an exercise considerably.

When to use this tool

Use the calculator in the weeks before you exercise, while the number of options and the timing are still open. Test how many shares you can exercise before AMT applies, compare exercising this year with spreading it over several years, and work out how much cash to set aside for the tax.

Exemption amounts, thresholds and rates change over time, so rerun the estimate when your plans or the figures change. With sums this large, also get advice from a tax professional who can account for the credit, the holding period and the rest of your return.

This is general information only and not financial or tax advice.

About This ISO AMT Calculator

Use this ISO AMT calculator to get an instant, accurate estimate. The figures follow official IRS guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.